A limited constitutional government calls for a rules-based, freemarket monetary system, not the topsy-turvy fiat dollar that now exists under central banking. This issue of the Cato Journal examines the case for alternatives to central banking and the reforms needed to move toward free-market money.

The more widespread use of body cameras will make it easier for the American public to better understand how police officers do their jobs and under what circumstances they feel that it is necessary to resort to deadly force.

Americans are finally enjoying an improving economy after years of recession and slow growth. The unemployment rate is dropping, the economy is expanding, and public confidence is rising. Surely our economic crisis is behind us. Or is it? In Going for Broke: Deficits, Debt, and the Entitlement Crisis, Cato scholar Michael D. Tanner examines the growing national debt and its dire implications for our future and explains why a looming financial meltdown may be far worse than anyone expects.

The Cato Institute has released its 2014 Annual Report, which documents a dynamic year of growth and productivity. “Libertarianism is not just a framework for utopia,” Cato’s David Boaz writes in his book, The Libertarian Mind. “It is the indispensable framework for the future.” And as the new report demonstrates, the Cato Institute, thanks largely to the generosity of our Sponsors, is leading the charge to apply this framework across the policy spectrum.

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Archives: 05/2009

Despite being hit by the global recession, the ruling Congress Party-led coalition swept to an unexpected victory in India’s general election, mainly because of rural prosperity in a country where 70 percent of the population is rural. Good monsoons and high agricultural prices—linked partly to the global commodity boom—helped agriculture grow at a record annual rate of almost 4.5 percent for five years. The combination of high prices and high output yielded a happy peasantry. High food prices did not outrage rural workers because of a new rural employment scheme guaranteeing up to100 days work, and this helped despite corruption in implementation. Many states raised minimum wages too, raising worker pay faster than prices, and this was sustainable because of high crop prices. The government had partly or fully forgiven bank loans to small farmers, and this too won its votes.

However, this policy will encourage loan defaults in future: far better would have been cash payments to the needy, while maintaining loan discipline. The world commodity boom made it possible for the government to hike its support prices for crops as well as minimum wages, but such happy conditions will not last. India needs agricultural reform that focuses on raising productivity rather than loan waivers and hikes in controlled prices. And it must carry on its good work in improving rural infrastructure.

Most election forecasts predicted a hung parliament and an unstable government. But Congress’ victory means India will have a stable government for five years. Unlike last time, it will not depend for survival on the Marxist parties, which thwarted several economic reforms and opposed the nuclear deal and defense framework agreements with the USA . Prime Minister Manmohan Singh’s courage in risking his government on this issue has been vindicated, and the two countries can now raise cooperation to a higher level. This could be especially important in checking Islamic terrorism, a serious problem for both countries.

The Congress must now proceed with legislation earlier thwarted by the Marxists—on pension reform, allowing private investment in coal mining, and raising foreign investment limits in insurance, telecom and retail. Victory and stability should also make it politically possible to avoid brazenly protectionist measures advocated by some sections of industry. The new agenda should include education reform—school vouchers to promote choice, liberalized rules for private schools, permission for foreign universities to set up shop in India . India badly needs administrative reforms to make civil servants and the police more accountable to citizens. A perceived lack of justice is an important cause for Maoist insurrections in some states, to which force alone cannot be the answer.

President Obama has appointed New York City health commissioner Thomas Frieden to head the Centers for Disease Control. Public health is an important issue, but as Jacob Sullum points out at Reason, Frieden has a weak grasp of what’s “public” in the world of health:

Frieden, an infectious disease specialist who is known mainly as an enthusiastic advocate of New York’s strict smoking ban, heavy cigarette taxes, trans fat ban, and mandatory calorie counts on restaurant menu boards, embodies the CDC’s shift from illnesses caused by microbes to illnesses caused by lifestyle choices. “Dr. Frieden is an expert in preparedness and response to health emergencies,” Obama said today, ”and has been at the forefront of the fight against heart disease, cancer and obesity, infectious diseases such as tuberculosis and AIDS, and in the establishment of electronic health records.” Some of these things are not like the others. When it comes to justifying the use of force, there is a crucial difference between health risks imposed by others (such as bioterrorists or TB carriers) and health risks that people voluntarily assume (by smoking or overeating, for example). In the former case, even those who believe that government should be limited to protecting individual rights can see a strong argument for intervention; in the latter case, intervention can be justified only on paternalistic or collectivist grounds. Frieden either does not recognize or does not care about this distinction.

Frieden told the Financial Times in 2006 that “when anyone dies at an early age from a preventable cause in New York City, it’s my fault.” That’s a breathtaking vision of the scope and power of government. If you eat butter or salt, or smoke, or climb mountains, or ride a motorcycle, or bungee-jump, or run with the bulls in Pamplona, Dr. Frieden feels that he and the government are personally responsible. This isn’t paternalism; your parents usually let you make your own decisions along about the age of 18. And it isn’t fair to nannies to call it “nanny state” regulation: after all, nannies are paid to take care of children until they can care for themselves; they don’t barge into your home or your bar or your restaurant uninvited, issuing orders to adults. Maybe the right term is food fascism, for the attempt to use force to tell adults what they can and can’t eat, smoke, or purchase.

More on the distinction between public health problems and health problems that are merely widespread here.

And more about Obama’s appointment of “a bunch of statist ideologues who have been waiting years or decades for an election and a crisis that would allow them to fasten on American society their own plan for how energy, transportation, health care, education, and the economy should work” here.

I think there is a pyschological element at work here a la Atlas Shrugged — many of the Washington lobbyists who were here in 93-94 feel repentant of having killed health reform back then and don’t want another 15 years of being considered “bad people” in Washington cocktail party circles. So they genuinely want to be “part of the solution” this time. The hard part is selling that to the folks who pay their salaries!

General Motors Corp., facing a probable bankruptcy filing by June 1, is telling 1,100 “underperforming” U.S. dealers they will be terminated as the automaker starts shrinking its retail network.

Most of the closings will occur by October 2010, and none are happening now, Detroit-based GM said today. The targeted outlets will have until the end of the month to appeal the decisions, GM said, without specifying the stores on the list.

The shutdowns are the biggest U.S. automaker’s first step toward paring domestic dealers to a range of 3,600 to 4,000 from 5,969 by the end of 2010.

To be sure, it is a very sad day for thousands of workers and businesses around the country. But we’re in the midst of a deep recession, which may be nowhere deeper than in the auto sector. Demand for cars and light trucks has absolutely tanked, which means the economy has an excess supply of inventory, productive capacity, and retail capacity.

Dealerships are closing, as they should be. Chrysler’s in bankruptcy, as it should be. GM is headed for bankruptcy, as it should be.

But this all should have happened long ago…

…long before President George W. Bush had the chance to circumvent the wishes of Congress to give Chrysler and GM more than $19 billion (not including GMAC) from the TARP allotment,

…long before President Obama had the chance to promise billions more and assume a large operational role for the U.S. government in Chrysler’s and GM’s future operations,

…long before President Obama had the chance to create a huge moral hazard by strong-arming Chrysler’s preferred lenders into taking pennies on their loan dollars, while giving preference to claimants of lesser priority,

…long before Ford, Toyota, Honda, BMW, Kia, and the rest of America’s automobile industry were implicitly taxed by the government’s insistence on preventing two firms from exiting the market or substantially reducing their presence in accordance with established bankruptcy provisions.

And most certainly, long before other businesses in other industries started to get the idea that failure is the new success.

In the last week there’ve been deeply worrying developments in Guatemala. Rodrigo Rosenberg, a highly respected Guatemalan lawyer, was killed Sunday outside of his house by unknown gunmen. On Monday, a posthumous video recorded by Rosenberg was released where he blames the country’s president, Alvaro Colom, for his assassination. Constantino Díaz-Durán, former editor of elcato.org, tells the story in a piece appearing in the Daily Beast.

Since Monday, thousands of Guatemalans have flocked to the streets demanding Colom’s resignation, but they have been met by an equal number of government supporters who are resorting to violence and intimidation against the protesters. This is the modus operandi of the hard-left in countries such as Venezuela, Bolivia, Argentina, and Ecuador. But nobody would’ve expected a center-left government led by a mild-manner president like Colom to employ such tactics.

However, there are more worrisome signs that the government is planning to crack down on dissenters. Yesterday a man was arrested after encouraging people through Twitter to withdraw their savings from Banrural, the bank involved in the corruption charges that Rosenberg made against the Colom administration. He’s been charged with “inciting financial panic.” Hours later, another man was arrested for distributing copies of Rosenberg’s video in the streets. The government claims he was “inciting the public.”

Whatever happens in the following weeks will determine the future of Guatemala’s institutional democracy. The United States should be paying closer attention to the situation, considering Guatemala’s position as Central America’s most populous democracy.

White House Official Says Government Will Stop Using Term ‘War on Drugs’

The Wall Street Journalreports that White House Drug Czar Gil Kerlikowske is calling for a new strategy on federal drug policy and is putting a stop to the term “War on Drugs.”

The Obama administration’s new drug czar says he wants to banish the idea that the U.S. is fighting ‘a war on drugs,’ a move that would underscore a shift favoring treatment over incarceration in trying to reduce illicit drug use…. The Obama administration is likely to deal with drugs as a matter of public health rather than criminal justice alone, with treatment’s role growing relative to incarceration, Mr. Kerlikowske said.

Will Kerlikowske’s words actually translate to an actual shift in policy? Cato scholar Ted Galen Carpenter calls it a step in the right direction, but remains skeptical about a true change in direction. “A change in terminology won’t mean much if the authorities still routinely throw people in jail for violating drug laws,” he says.

Cato scholar Tim Lynch channels Nike and says when it comes to ending the drug war, “Let’s just do it.” In a Cato Daily Podcast, Lynch explained why the war on drugs should end:

Cato scholars have long argued that our current drug policies have failed, and that Congress should deal with drug prohibition the way it dealt with alcohol prohibition. With the door seemingly open for change, Cato research shows the best way to proceed.

In a recent Cato study, Glenn Greenwald examined Portugal’s successful implementation of a drug decriminalization program, in which drug users are offered treatment instead of jail time. Drug use has actually dropped since the program began in 2001.

In the 2009 Cato Handbook for Policymakers, David Boaz and Tim Lynch outline a clear plan for ending the drug war once and for all in the United States.

Help Wanted: Supreme Court Justice

Justice David Souter announced his retirement from the Supreme Court at the end of last month, sparking national speculation about his replacement.

Calling Souter’s retirement “the end of an error,” Cato senior fellow Ilya Shapiro makes some early predictions as to whom President Obama will choose to fill the seat in October. Naturally, there will be a pushback regardless of who he picks. Shapiro and Cato scholar Roger Pilon weigh in on how the opposition should react to his appointment.

Shapiro: “Instead of shrilly opposing whomever Obama nominates on partisan grounds, now is the time to show the American people the stark differences between the two parties on one of the few issues on which the stated Republican view continues to command strong and steady support nationwide. If the party is serious about constitutionalism and the rule of law, it should use this opportunity for education, not grandstanding.”

Obama Pushing for Credit Card Regulation

President Obama has called for tighter regulation of credit card companies, a move that “would prohibit so-called double-cycle billing and retroactive rate hikes and would prevent companies from giving credit cards to anyone under 18,” according to CBSNews.com.

But Cato analyst Mark Calabria argues that this is no time to be reducing access to credit:

We are in the midst of a recession, which will not turn around until consumer spending turns around — so why reduce the availability of consumer credit now?

Congress should keep in mind that credit cards have been a significant source of consumer liquidity during this downturn. While few of us want to have to cover our basic living expenses on our credit card, that option is certainly better than going without those basic needs. The wide availability of credit cards has helped to significantly maintain some level of consumer purchasing, even while confidence and other indicators have nosedived.

In a Cato Daily Podcast, Calabria explains how credit card companies have been a major source of liquidity for a population that is strapped for cash to pay for everyday goods.

On Monday, the Obama administration held a well-publicized love-fest with lobbyists for the health care industry. It turns out that rather than a “game-changer,” the event was a fraud. And the industry got burned.

Over the next 10 years — from 2010 to 2019 — [these industry lobbyists] are pledging to cut the rate of growth of national health care spending by 1.5 percentage points each year — an amount that’s equal to over $2 trillion.

Yet The New York Timesreports that isn’t the magnitude of spending reductions the lobbyists thought they were supporting:

Hospitals and insurance companies said Thursday that President Obama had substantially overstated their promise earlier this week to reduce the growth of health spending… [C]onfusion swirled in Washington as the companies’ trade associations raced to tamp down angst among members around the country.

Health care leaders who attended the meeting…say they agreed to slow health spending in a more gradual way and did not pledge specific year-by-year cuts…

The Obama administration seems a little less clear on that rule. Again, The New York Times:

Nancy-Ann DeParle, director of the White House Office of Health Reform, said “the president misspoke” on Monday and again on Wednesday when he described the industry’s commitment in similar terms. After providing that account, Ms. DeParle called back about an hour later on Thursday and said: “I don’t think the president misspoke. His remarks correctly and accurately described the industry’s commitment.”

The group of six organizations with a major stake in health care…had been working in secret for several weeks on a savings plan.

But they learned late last week that the White House wanted to go public with the coalition. One health care insider said: “It came together more quickly than it should have.” A health-care lobbyist said the participants weren’t prepared to go live with the news over the weekend, when the news of a deal, including the $2 trillion savings claim, was announced by White House officials to reporters.

Gosh, it’s almost like the White House strong-armed the lobbyists in order to create a false sense of agreement and momentum. Pay no attention to that discord behind the curtain!

At the time, I also hypothesized that this “agreement” was a clever ploy by all parties to pressure a recalcitrant Congressional Budget Office to assume that the Democrat’s reforms would produce budgetary savings. “Otherwise, health care reform is in jeopardy,” says Senate Finance Committee chairman Max Baucus (D-MT). Turns out there was no agreement, and the industry was just being used.

American Hospital Association president Richard Umbdenstock was more right than he knew when he told that group’s 230 members:

There has been a tremendous amount of confusion and frankly a lot of political spin.

Merriam-Webster lists “to engage in spin control (as in politics)” as its seventh definition of the word “spin.” Its second definition is “to form a thread by extruding a viscous rapidly hardening fluid — used especially of a spider or insect.” Which reminds me…